Baltics Set Example for Energy Integration, but Not Regional Unity

May 18, 2016 | 00:00

Baltics Set Example for Energy Integration, but Not Regional Unity

Although the Baltics set an example for the rest of the EU when it comes to energy integration, the region’s three states of Estonia, Latvia and Lithuania lack unity in finding common solutions within the regional energy market. Striking an accord for these tight-knit neighbours has now become crucial with the ongoing discussions about the power grid synchronization - securing second power cables to Poland and Sweden, claims Vidmantas Jankau...

Although the Baltics set an example for the rest of the EU when it comes to energy integration, the region’s three states of Estonia, Latvia and Lithuania lack unity in finding common solutions within the regional energy market. Striking an accord for these tight-knit neighbours has now become crucial with the ongoing discussions about the power grid synchronization - securing second power cables to Poland and Sweden, claims Vidmantas Jankauskas, an acknowledged independent Lithuanian energy expert and professor at Lithuania’s Vilnius Gediminas Technical University.

LJ: In a recent and much advertised energy event, Litgrid, Lithuania’s electricity transmission system operator, singled out these challenges as a priority to be resolved by 2024, by that time power grid synchronization with Western Europe should be concluded. Bearing this in mind, which of the following four related issues do you consider to be the most important? Laying additional power cables with Poland and Sweden, cutting electricity generation costs by €90 million, a flexible and effective expansion of alternative sources of energy in the region, or joint energy politics?

VJ: I believe the second grid links with Poland and Sweden and, especially, regional unity on energy issues matter the most.

Yet in 2008 Lithuania agreed with Estonia and Latvia that we need a single energy strategy for the entire Baltic region. But, unfortunately, this is yet to be drawn up. It’s quite sad.

With the renegotiated gas price this year with Statoil, prospects for the Klaipeda LNG terminal look way better now, although they would have been considerably better had the project been a regional one, i.e. including Latvia. Unfortunately, we failed to find common ground with our neighbor.

But cooperating and finding common ground between the three states has become urgent when the capacity, itinerary and technicalities of the new interconnectors are yet to be agreed on. Besides, the Baltics need to line up their grid networks with the requirements set out by ENTSO, the European Network of Transmission System Operators. Unity is again a must here.

Of all the challenges looming ahead, the optimism the Baltics had for grid synchronization a couple of years ago has tapered off substantially, as the date for the completion of the synchronization process has been pushed forward from 2020 to 2024, or even 2025. This latter date was mentioned at the Litgrid conference, by the way.

We tend to juggle two terms when speaking about the Baltic energy market, i.e. diversification and synchronization. The former is purely an economic thing, and we’ve achieved a lot on the subject of diversifying our energy sources, from building the LNG terminal in Klaipeda, to laying the interconnectors with Poland and Sweden, to harnessing wind energy and bio-fuels.

Power grid synchronization on the other hand is considerably more political, requiring respective political decisions. And, certainly, it is a very technical issue. The current transmission system we are in [BRELL, the IPS/UPS synchronous area encompassing Belarus, Russia, Estonia, Latvia and Lithuania – L.J] has worked quite reliably for many years, but now, because of EU energy politics and our EU commitments, the transition from BRELL to the European transmission system is inevitable. We cannot complete it however with another sub-sea cable to Scandinavia. The only pathway we have is through our (very narrow) border with Poland.

LJ: Despite the EU’s standoff with Russia and Lithuania’s distinctive anti-Kremlin rhetoric, Moscow has not attempted to retaliate for locking Lithuania out of the BRELL system or hindering the electricity flow. Do you believe Russia and Belarus will let Lithuania exit the system without making it pay a price?

VJ: This is a question we hear all the time in Lithuania whenever the conversation turns to issues about power in the region. A year or so ago I met a high-ranking official from FGC UES, Russia‘s Federal Grid Company of Unified Energy System, or the Russian electricity transmission company, who is very knowledgeable about the situation in Russia. He acknowledged that the Russian regulators had been ordered to prepare all the necessary documentation before 2018, with the specific absence of the Baltics within the high-power voltage system. In a nutshell, they are working on it very responsibly, without the inclusion of Estonia, Latvia and Lithuania. Our BRELL pullout encourages Russia to think about new transmission capacities, things it already has planned, or as in some cases has started erecting new high-power lines and power transformers. To believe the FGC UES representative, Russia is working fast on that as there is an understanding that Lithuania will exit BRELL sooner rather than later. Bearing in mind that Russia has tolerated our withdrawal, I don’t think it will hinder the process.

LJ: Do you believe we can upset neighboring Belarus with non-stop efforts to halt the construction of the nuclear power plant in Astravets due to safety concerns? What if it resorts to the BRELL card to sour our life?

VJ: As I said, the Russians will let us go free, so Belarus, the closest ally of Russia, is unlikely to hamper our transition to the European grid network.

LJ: Some of the Lithuanian demands with respect to Astravets are seemingly politically charged. What are you concerns about the facility in terms of its safety

VJ: Let’s remember that the plant is being erected very close to the Lithuania borders and the capital, Vilnius [the distance between Vilnius and Astravets is just 45km – L.J]. Regardless of the country which builds such a facility, it does pose certain risks to its nearest neighbour. Naturally there is apprehension from the Lithuanian side.

From another perspective, our efforts might be too late now, and not without a political tinge ahead of the coming parliamentary elections in Lithuania this fall. As Belarus is 100 percent dependent on Russian gas - and remembering that all Belarusian generation comes from gas - the country’s decision to build Astravets has been greeted positively by many international energy bodies, the United States included. In the same way Lithuania did all it could to gain energy independence from Russia, Belarus does what it thinks suits it best to secure its energy security and independence.

Lithuania’s major concern is with the Russian reactors that will be installed at Astravets, although some modern nations such as Hungary and Finland use them. The same or similar Russian reactors have also been installed in the Czech Republic and Slovakia, and were planned for a new Turkish nuclear power plant [because of the spat between Russia and Turkey over a downed Russian fighter jet last December, the project’s prospects remain unclear – L.J].

I believe that with the ruckus over the construction in Belarus, the most we can get is engaging International Atomic Energy Agency (IAEA) to address our concerns. Getting Belarus to agree to let it continuously inspect the site and the reactors would help alleviate safety concerns about the plant, although the risk will of course remain. As a member of the EU Eastern Partnership Progamme, I recently met with Belarusian energy officials who told me they had presented the Astravets project to IAEA and are updating them on construction developments.

I really do not believe that the European Union will interfere in the Belarus project for two reasons. Firstly, with the EU economic sanctions against Belarus recently lifted, the EU will not resort to new measures that potentially sour relations again. Secondly, the EU has not until now worked out a single approach towards new nuclear projects within unionist territory, so, the notion is it is not entitled to enforce Belarus to abandon the project, which is due in 2018.

Lithuania, however, has to continue to beat the drums to ensure that the plant is in accordance with the highest internationally recognized safety standards.

LJ: Apparently realizing that halting the construction might be impossible, Lithuania has launched a campaign in the Baltic Sea region to get the states signed up to the Belarus generation “non-purchase” act. Can these efforts pan out?

VJ: Frankly speaking, I don’t think so. Cutting Belarus’generation from the intertwined transmission systems does not look like a doable thing to me to be honest. As Belarus is targeting the huge Russian power market with the Astravets plant, I don’t think it is very worried about our clamouring. How can you get our Baltic neigbours to sign such an agreement if mixed up electricity reaches them? How to separate Russian and Belarusian electricity? It is technically impossible.

LJ: The Lithuanian and Swedish electricity interconnector NordBalt went offline nearly a dozen times during a four-month period. The Lithuanian TSO Litgrid CEO, Daivis Virbickas, insists it is “a normal thing” with new power links. Do these reoccurring disruptions look normal to you?

VJ: I think there is nothing wrong with the disruptions. The similar Polish and Swedish power link, SwePol, has been offline around 35 percent since it started operation. As one of the longest cables in Europe, it does function quite well. Speaking of electricity prices in the Lithuanian trading zone on the Nord Pool Spot (NPS) during the malfunctioning, they are not necessarily surging. They did edge down in some cases briefly, as a matter of fact.

LJ: Some believe Lithuania does not need domestic generation, or needs very little of it, with the NordBalt and LitPol links in operation. What’s your take on this? Does Lithuania need to keep the Elektrenai Power Plant (LPP), the country’s main power generator, in operation?

VJ: To comply with international standards, Lithuania needs to guarantee having a system of adequacy in its electricity market. In others words, it is all about securing necessary power reserves in case of a protracted emergency. As only one of LPP’s 440MW modern combined cycle units is effectively left in operation [four other units were shut down along the way with the launch of the cables and the other two work on and off depending on the power demand – L.J], it is the chief generator for power reserves. Although gas consumption in the country has decreased by approximately 25% over the last three years, I wouldn’t be surprised if more gas-fired power plants will appear in the country [CHP plants are currently being built in Vilnius and Kaunas – L.J], especially now that we need to think how we will use the LNG from the Klaipeda terminal.

LJ: Do you think Lithuania will restart the Hitachi-led nuclear power plant project in Visaginas?

VJ: I really doubt it, frankly. As Estonia and Latvia’s dependence on the plant has diminished, Lithuania is not in a position to financially pursue the project on its own. Not only would the issue of financing the project haunt us, we would not have a market willing to buy the expensive electricity that the plant would generate. There is no way we would be able to compete with Scandinavian and Russian electricity prices.

LJ: Despite the drawbacks related to the Lithuanian energy sector, Lithuania has been praised for its accomplishments in the energy field. How outstanding do they appear across the EU?

Indeed, the Baltics, especially Lithuania, have become the most integrated energy market across the European Union. With the two cables our power import capacity has doubled. Neighboring Poland does a lot worse in grid interconnectivity, and, in some EU regions, notably in Spain and Portugal, of which both have weak power grid links with France. In meeting EU energy target integration, we definitely set the best example for other EU member states.

When it comes to renewables, Lithuania does pretty well regionally with wind power development. The currently installed onshore wind capacity of 424MW is set to go up to 500MW. Compared to Estonia, which has taken on two major offshore wind projects lately, offshore wind development has stalled in Lithuania because of changing legislation, however.

To wrap it up, the prospects of Lithuanian energy market are now a lot better than they were recently. As we have successfully overcome burdens with the existing interconnectors, I have no doubt that we will work out what suits best the region in respect to the new power links, too. The time for discussions and solutions having a long-term impact has come again.

Image: Symbolic commissioning of LitPol Link and NordBalt in the Palace of the Grand Dukes of Lithuania in Vilnius on 14 December 2015. Courtesy: Litgrid AB, Lithuanian TSO.